# Brief for the Respondent in Opposition — Delta Air Lines, Inc. v. Edwards > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386419_0534%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Brief for the Respondent in Opposition - **Published:** January 1, 1958 - **Citation:** 358 U.S. 882 ## Text ° OCT 17 1958 No. 387 -] JAMES R. BROWNING, Clerk _ Sula Sqrene Geto fe Wed ie - Ocroser Term, 1958 Detta Am Lines, Inc., PETITIONER . W. Sam Epwarps, Administrator c. t. a. of the Estate ~ of Marton H. ALLEN, Deceased, RESPONDENT ¢ ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF. APPEALS FOR THE FIFTH CIRCUIT "BRIEF FOR THE RESPONDENT IN OPPOSITION J. LEE RANKIN, ek; . Solicitor General, * CHARLES K. RICE, Assistant Attorney peer MELVA M. GRANBY, : JOSEPH ‘KOVNER, nae Attorneys, | os Department of Justice, Washington 25, D.C.” yetiee te. wip oo TS Fille COPY FILED. (1) = : INDEX pe, S . Page eee, Pree ice b aCe ad ek kan 8% Ye a ° OIE gat YC SE EP IRIS SAE ay | NID MIU 6s gala Cais s vcech tb idbacs whee d See aS ek Els 2 7 Statement’../.......... ERT eee. Sere Tee ey armald Das 2 i a a Pe aay Te ie binaee sic aaes hes aan toes 5 P Conclusion ..... EY LEE ET TTT LECT ERTEE eer ere ee 8° i EE Gy Shea Wewewde ean eRERS Chath eee os 9° i. “ ae : i Cases: ‘CITATIONS . ; Breeze Corporatians y. United States, 117 F. Supp. 404... 7 Ay ~ Commussioner Vv. Dumart Textile Co., 142 F.2d 897... 7 | “Commissioner v. Hansen, No. 380, October Term, 1958. . Ss ‘4 Continental Tre iS L. Co. v. United. States, 286 U. s ; a ok eas a ce Oe eek es aes Ce ek bc kes i. oe — v. c ommassioner, 27 F. 2d 724; certiorari denied, fp RE es abs ag hd sea Awa hae 6-4 Bos kh a wos 7 Delta Air “hide Inc. v. Summerfield, 347 U.S. 74... ti > Heinz, H. J. Co. v. Granger, 147 F. Supp. 664.00... 7 Re i MceGuirl, Patrick, Inc. v. Commissioner, 74 F. 2d. 729. : certiorari denied, 295 U.S. 748. 2.......0.0. 08 00..00585 7 : « Midwest Motor Express v. Commissioner, 251 F.. 2d 405, pending on petition for certiorari, No. 359, this Term ..... SEPA) Pe grea PSST ee 7 New York Cent. R. C ove C oR F. 2d 247. .° certiorari denied, 296 U. 8. 653..4...6...\.....406.. ‘ ; ) Security Flour Mills Co. v. Commisstoner, RI S.281. | Sharp v. Commissioner, 224 F. 24° 920........4..... 7 Texas Trailercuach v. Commissioner, 251 F. 2d 399... s Statutes: . Civil Aeronautics Act of 1938, ¢. 601, 52 Stat. 973: a See. 405(a) (49 U.S.C. 1952 ed See 4850 See. 4061) 49 U.S.C. 1952 ed., See. 48600 yi Sec. 406¢b) (49 U.S.C. 1952 ed., Sec. 486¢b) % Internal Revenue Code of 1939: ae ) See. 41 (26 U.S.C. 1952 ed, See 4... 6. a A "See. A2ta) (26 USC. 192 ed. See. A2tair.. j on the Supreme Court of the United Bates OCTOBER TERM, 1958 No, 387 Detta AiR LINEs,. INC., PETITIONER v.- ~W. Sam Epw ARDS, Administrator ¢, t. a, of the Estate| of Marion H., ALLEN, Deceased, RESPONDENT ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED ‘STATES COURT OF APPEALS FOR THE -FIFTH CIRCUIT BRIEF FOR THE RESPONDENT IN OPPOSITION oe OPINIONS BELOW i The opinion of the District Court (R. 77-81) is re- ‘ported at 150 F. Supp. 589. The ‘kone of the Court of Appeals (Pet. 15-20) is reported at 255 F.2d —. s JURISDICTION _ ‘The.judgment of the Court of Appeals was entered -on May 23, 1958. (Pet. 20; R. 154.) - A petition for _ rehearing was denied on June 24, 1958. (R. 165.) The petition for a writ of certiorari-was filed on September 19, 1958. Jurisdiction of this © ourt is invoked undef 28 U.S.C., Section 1254. 9 aa “te .- QUESTION PRESENTED. be : ty! Whether, as the court below held, the taxpayer's right to additional pay for trabisportation of air mail in 1940 did not become tinal and detinite in amount, and hence “did not aeerue, until the determination ii 1942 of fair . and reasonable ‘compensation therefor by the Civil S Neronauties Board. . 9% ay P ° ™~ \.. STATUTES INVOLVED The velevant provisions of Sections 41 and 42(a) of the Interial Revenue Code of 1939 and Sections 405(a), 40600) and Chy of the Civil Aeronauties Act of 1928 are set forth in the Appendix, infra, pp. 9-12. . STATEMENT The facts as stipulated (ROWG55), Found by the Dis- triet Court (R. 77-81) and restated Drthe Court of Ap- peals: (Pet. 15-20), may be stimmarized asfollows: Delta Nir Lines, Ine. an air carrier of: persons, -prop- ertyand tneil, is an accrual lisis“taxpavers Beginning In 1954 it transported mail over Route 24 between Texas and South. Carolina and’ intermediate points under a contract with the Postmaster Creneral, (R.47, 50.) In 1956, the ‘hase rate for the carriage of this mail by taxpayer was lived by the Thiterstate Commerce Con- MissMn at 22eents per pity mile CRS S8.) Ind fine, INS. the Civil Aeronautics Act of 1938 Was enacted 4 amd taxpayer was issued a certificate sof publie eon- Venience and necessity hy the Civil Aeronauties Au- et oritwe OR, OW) Section 40500) of the Act provided | thatthe prior contraets for mail carriage shouldbe con: Tinted in effect until the isstainice of a vertitiente of vUbtie convenionee and necessity by the Authority: nl Mot thereatter, until the Atithority tixed a rate under e « 7 3 ' | 6 Section 406 of the Act (Appendix, infra, pp. 11-12), the carrier would be paid the rate previously fixed by the Interstate’ Commerce Commission. (R.51.) Section 44i(a) of the Net authorized ‘the Authority to fix and determine “the Tair and reasonable rates’? for such gompensation upon its own initiative or upon a. petition cof the Postmaster General'or an air carrier, (R.52.)> On December 1, 1939, the Autherity, acting on its oWn initiative, instituted proceedings to determine Whether or not. the rates he ings paid to taxpayer for the, transportation of mail Were fair ayd reasonable. (R. a2.) The taxpayer did not request any new rates for ‘Route 24, but took the position that, sinee the Authority instituted the proceeding, it should fix the rates based on the service rendered. (R.53.) During the pendency of this proceeding, the taxpayer continued to acerue “and receive pay for its mail transportation at the rate prevjously fixed hy the laterstate Commerce Commis- sion, in accord with its’ consistent practice of aécruing pay at the then current rates for mail transported in each taxable vear, (R.52-55,54.) On January 21, 1942, the Civil Aeronattics Board, sueeessor to the Authority, issued its order GR. 53) and Opinion R. O4-151) fixing aratecot thirty-one cents perpay-mile for the period Beginning Decentber 1, 1939, sul terminating July 14, DD eR. 58). Vader this order, the amount of tax- payer's additional mail transportation pay for its fiseal Jvear ending ine 30, 1910, was S98 1.86, Payinent of Mis amount was received b iV the taxpayer during its lise al vear ending June 30, 1942. and was ineluded as . -ingeme in HS dneome tax return for that vear, CR. a5- Hi ) a i , “9 ). The question.in this case arises in eaameection with the taxpayer's excess profits tax liability for 1944 and ” ™ 4 1945, In filing its income and excess profits tax returns for ‘those years, the taxpayer did not claim that the ad- ditionfal mail pay accrued in 1940 for the purpose of compi\ting. its 1940-base period income credit, but for ‘other Nasons reported no gXeess profits tax liability. (R.47, 5%) Later, in June, 1943 Upon an examination Of taxpayhr’s excess profits tax liability for 1944 and M5, the Commissioner of -Interndl Revenue found that the taxpayer was liable for excess profits taxes and that there was a deficiency, (R49) The amount of the deficiency, was absorbed hy mised tax credits and an operating loss capry-back hut the interest on the deti- cieney was due and ottstanding, ORL 49.) At this point, taxpayer contended that it had no liability for EXCESS profits taxes in 1944 and 1945 and the interest thereon, on the ground that the additional mail pay properly aeerued in 1940.° CR. 22.) The amounts invelved are stipulated: if the additional mail pay did not acerne in 40, interést in the aggregate amount of #£75.363.15 was due, (R23, MM.) This interest was paid by the taxpayers under protest to the Collector yy Internal Revenue and the instant suit was brought after denial of a claim for refund.’ CR. 54-55.) The Distriet Court held that. under the rule of Con- fineutal TindeL. Cov. Vuited States, 286 US, 290, the right to the additional, payments acertieds i? the years the transportation was furnished. after enactment of ‘the Civil Neronanties Net of 1988, ORO80.). The € ‘ourt of Appealy reversed, holding that. under the Conti . mental Tie WL. Co. rule, the right to the additional ' The “Hit Wits berenael | eats’ Ohyee west tte ant the € ole ctor af | . ternal Beverages tee what tye peavnert were mide Oh Oe Ti apreal Woe token by the (rated States 9s “detendant” «ROs2) hence the caption pt the appeal in the court beled. Urtited stat oof Amerien vo Delta Air Lines. Ine.” ev . » pay did not acerue until the determination of just and reasonable rates of compensation was thade by the Civil Aeromauties a: in 1942. ( Pet. 17-20.) ' ARGUMENT 7 ¥ The decision below carrectly Applies the established — crule of law to the undisputed facts of the case, There is no cotitliet of decisions and no other occasion for further review, 1. The decision below-is correct. The basie rule is that under Sections 41 and 42 of the 1989 Code (Ap- when the right to receive it has beeome final and definite inamount. Séearity Flour Mills Co. v. Commissioner, 21 US. 281. The decision in Continental Tie & L. ‘0. vf united States, supra, prescribed the test for fixing the date ‘of accrual in the situation where taxpayer's rights await a determination by a Governmental agency. pendix, infra, pp. 9-10) an item of income is acerued * In such avase, the item acerues without formal agency determination whyre the measuré of payment to be re- ceived by the taxpayer ix fixed by the statute and: the amount can be reasonably ascertained upomthe basis of information imA@he possession of the taxpayer. In ( on- tinental Tie & L. Co, the statute flatly ptevided that any railroad taken over by the Government in World War-] was vested with a right te reimbursement by the Government for any ensuing déficits in its operation. The amount of the deticit was established by the ear- riers” own records and accordingly the Court held (yp. * * * the taxpayer had. in its own books and ae- counts data to whieh it could apply the ealeulations required by the statute and ascertain the quantum of the thy award within reasonable limits. fy . G In the case at bar, the rule of Continental Tie & L. €0., as the court below correctly noted. (Pet. 20), re- quires the conclusion that the taxpayer's right to addi- tional pay did not accrue until the determination of the ‘Board fixing fair and reasonable rates and the effective date of the new rates. The Civil Aeronautics Act (see Section 406, infra, pp. 10-11) does not provide any def- inite measure of compensation or fix effective dates; it leaves the determination of -rates to the-expert judg. . Ment of the Board, stibject to review. by the COUNTS, Delta Air Lines, Ine. y. Sum merfield, 347, US..74, Tax- payer concededly made no effort to estimate what rate would be fixed under the Act: instead, it accrued pay at the existing rate and. simply afvaited the determination | of the Board. a 6 Reference to the opinion of the sSoard (R. 94-121) quickly dispels the sugeéstjo= that its determination Wits a mere ministerial duty. Before reaching its judg- ment as to the fair and reasonable rates needed to eom- pensate the carrier for transportation of mail and. with ‘its other reveiiues, te assure the maintenance and de- Velopment of an adequate air transportation system for commerce, postal service: and defense of the United® States, the Board analyzed existing rate schedules. re- Viewed the carrier's equipment program, decided what ems were to be iheluded in operating income, what caljustinents should be made in depreciation charges. and what effect Was to be given operating losses ona eetment of the route. Moreover: there was no possible: Way by whieh the MXpayer could tell in advanee what effective date the Board would consider proper if. it decided to tix a neay rate, . | In similir cireumistances, ie. where the’ amount of mie award is dependent igpon the exercise of admitis- en . 7 : é : trative judgment, the courts have uniformly held that the right to income does not aeerue until the judgment _is made. Midwest Motor Express v.-C ommissioner, 251. 2d 405 (CLA, 8th), pending on petition for writ “of certiorari? No, 359, this Term; Sharp vy. Commis- sioner, 224 F.2d 920 (CLA. 6th): New York Cent. R. Co. v. Commissioner, 79 F.2d 247 (CLA, 2d), certiorari denied, 296 U.S, 653; Patrick MeGuirl, Inc. vo Commis: sioner, 74 EF, 2b 729 (CLA, 20), certiorari de nied, 2O5 US. 748; Breeze Corporations vo U nited States, WAT BL Supp. 404 (C018) YE A. Meine Co, y. (ranger, 147 PF. Supp. 664 (W.D.-Pa.).° Sinee Continental Tie de 1. Co, the Courts of Appeals have had no difficulty in distinguishing the ‘situation where the statute fixes the measure of compensation to be paid and where that. measure may he. applied by the t taxpayer on the aay of information in his possession. ( om missioner *. Dumari Tertile Co 142 F.2d 897 (CLA, 2d) sand’ see Dally v. Comsmisnioner, 227 F. 2d 724 (CLA, 9th), ‘certiorari denied, 351 U S. 908, ie . There is no conflict ef decisions, As already noted,, the Court of Appeals correctly applied the tule ‘of Continental Tie & L. Co, And there is uo merit. in the suggestion (Pet, 8-11) that there is conflict with cases invelvi ine the acerual of reserves by antomobile dealers, © The question presented in the automobile-dealer "* re- serve’? cases is whether an aceryal basis taxpayer whe sells property and receives partof hisgainon the sale in cash and part in the formofa credit froma finance com. pany the latter portion to be ultimately satisfied either hy payment in cash or by offset against the taxpayer's ~ whligations——is required. to report the amount of gain * * The petition aa Midwest Motor w as filed on-other grounds g . f so credited (as well as the gain in cash) as income for — the year in which the credit is made.’ See the Govern- ment's petition for certiorari in) Commissioner v. Hansen, No, 380, October Term, 1958, The instant ease and eases sueh as HMeiesen are alike only in that beth involve application of the same under: Iving principle, (a principle well settled and net) ine dispute in either case), ec that income accrues when the right te,receive ‘it becomes tinal, and definite in amount. That principle applies, ofjeourse, te a wide, Variety of unrelated transactions. [tis apparent that “the transactions invelved in dealer ‘reserve’? cases are wholly ungelated to thes? in the ease at bar, When rights hecoame tinal as between seller and: tinanee com pany under arrangements peculiar te installment buy ing certainly sheds ne light on the issue when this i Xpayer became entitled te final and definite award — of mail pay." CONCLUSION wear The petition fora writ of certiorari shouldbe denied. Respectfully submitted, ’ Tas J. Lek RANKIN, Solicitor Geueral, (Hartes K. Rick, oo . suk Assistant Attorney General, ; Meuva M. Ginaxey. | Josernu Kovnen, > | | —Atforneys. OcroBer, 198, : ; ‘The court below did not, as taxpaver eontend- Pet ty Its lee tspon Hpon Ts ras Trath reach \ Come modsvnn ¥- D5) ] 4 395 (CUA. Sth. a ease involving dealer reserves: it meroly er that ease (Pet) 19) for the underlying rule, ‘ 9 APPENDIX Tnterual Revenue Code of 1939; Sec. 41. Generar Reve. The net income shall be computed pen the basi- of the taxpayer's annual accounting pyriod (tise! vear or ealendar vear, as the ease may be) in aecord ance with thecmethed of accounting regularly em ploved in keeping the hooks of sueh taxpayer: but if ne seh method of aecounting has bebin se employed, or if the method emploved does not clearly retleet the income, the computation shall he made in accordance with sueh method as in the opinion of the Commis simier does clearly retleet the imeeme. TP the. tay payer's annual accounting period is other than a fiscal vear as defined in section 48 or if the taxpayer has ne anal accounting period or does not keep hooks. the net in ome shall be computed qr the Te of the calendar ye ir. (26 TUS 1952 ed. See. 417 Sec. 42. Peetoo is Watow Drews oF Ginoss PNeowe INenepen, (a) [AS aime aded hy See. TH of the Re ‘vemne Aet of IH, e FIZ. 55 Stat. OST] Geferal Rule. The smmeint of all items of gross income shall be itelucded in, the gioss income for the taxable vear in which | received by fhe taxpayer. unless. under nietherd- of iecount ing permitted cnder section Oh any Heh. “Meunt sane to be pivperly aecounted for as of a different: pe ‘ried: Fn the ease of the death of taxpayer there shall bee invelindeed ine computing net ieonne for the taxable period in whieh falls the date of his death, amounts accrued up te the date of bi- a 9 10 death if not otherwise ae ineludible in respect of such period or a prior period, * ; “: eae * % (26 U.S.C, 1952 ed.. See. 42.) é Civil Acronauties Act of 19338, «, GOL, 52 Stat. Q73: Sev. 405. (a) Each contract bet ween the United States and any-person for the carriage of mail, en- i= tered into or continued. under the provisions of the. Air Mail Act of 1994, as amended, andg-each contract for the carriage of mail by aircraft in’ Alaska, shat! he continued in effect: until canceled sin accordance with this subsection. Each such contract shall he ean celed upon the issuance to the holder of such contract of a certificate of public’ convenience and wecessity authorizing the trauspertation of mail by aireratt between the peints covered by such contract. or upon - the failure of the holder of such contract to apply ter such certificate within one hundred and twenty days: after the date of enactment of this act, or upon a determination by the Authority that such certitieate should yot be issued. Until the Aithority fixes rates under Section 406 of this Act, the Postmaster Gen eral shall pay compensation for the: transportation of mail by direraft at the rates provided by each sich contract or, where rates have been heretofore or shal! héreatrer be tived lye orders of the Lnterstatée (on Merce Commission. purstiant to proceedings/itet i tuted prior te the date ofenaetment of this Net, shill a pay compensation for steh transportation in accord anee With sueh orders as if this Net Shad mot been enacted, * / # * * * (49, UUS.C. 1952 ed. See 485.) 11 Sec, 406, (a) The Authority is-empowered and, ‘directed, Upon its own initiative or upon petition of the Postmaster General or an air carrier,,(1) to fix and determine from time to time, after notice and hearing, the fair and reasonable rates of compensa. - tion for the transportation of mail by aireraft, the facilities used dnd useful therefor, and the services connected therewith (incliding the transportation of mail by an air carrier by other means than aircraft Whenever such ‘transport tation iS incidental to the _transpoytation of mail by aireraft or.is made neces- sary by conditions of emergency arising from air- craft: operation), by each holder, of a certificate authorizing the transportation of mail by aireratt, and tomiake such rates effective from such date as it shall determine to be proper; (2) to prescribe the method or methods, by aircratt-mile,. pound-mile, weight, space, or any cumbination thereof, or other- fy wise, for ascertaining such rates of compensation for, each’ air cafrier or class of air carriers; and (3) to publish the same ;and the rates so fixed and deter- mined shall be paid by the Postmaster General from. appropriations for the: transportation of mail by aireraft. (b). In fixing and determining fair and reasonable rates of compensation under this, section, the Author- ity, considering the conditions petuliar to) trats- portation by aircraft and to the particular air carrier oy class of air carriers, may fix diffe ‘rent rates for ‘different air carriers or classes: of air carriers, and different classes af service. In determining the rate in each case, the regret’ shall take inte consider: ation, wmneng other factors, the condition that sich airearriers nay hold and operate under cértiticates aithorizing the carriage of mail only by” provid: Ig necessary and adequate facilities and service cg ee lz for the transportation of mail; such. standards re- specting the character and quality, of service to be rendered by air carriers as maybe prescribed by or pursuant to law; and the need of each such air car- rier for compensation for the transportation of mail sufficient to insure the performance. of such service, -and, together with all-other revenue of the air carrier, to enable such air carrier under honest, economical, _and efficient management, to maintain-and continue ' the development of air transportation to the extent and of the character and quality required for: the commerce of the United’ States, the Postal Service, and ‘the national defense. . 7 a * Ce, OMe ‘* * (49 U.S.C. 1952 ed., Sec. 486.) a “US GCOVEANMENT PRINTING OFFICE 1980) © Geasez 4 , . “ --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386419_0534%3A3. 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